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Sephora Final Essay

1. Assuming she receives the additional funding, how should Bornstein allocate her budget across the various digital categories? Given that the additional funding requested must be shifted from Sephora’s other marketing spending, where would you propose to cut? Why?

According to 2010 data, 45% of Sephora’s media spending is in retail marketing that includes catalogs, store animations and print followed by 35% in Online marketing that includes search, affiliate and social media and 20% in Beauty Insider marketing that includes mails, gifts and events. The major chunk of media spending goes to traditional retail spending which in my view needs to be cut down. The reason for cutting catalog and print costs is that each day the number of people shifting to the digital media are increasing.

The number of people using Smartphone, tablets and computers to read various newspapers, magazines online is increasing day by day. Also, Sephora’s clients are women in the age category of 25-35 years who prefer digital media than print media. Sephora does not need to stop and mailing catalog for good because these catalogs showcase Sephora as an expert, trend-setter and an important aspect of the company’s image. We can decrease the number of prints and send them to selected customers.

Allocating Budget:

a. Mobile – 25%
b. Twitter – 10%
c. Facebook – 10%
d. YouTube – 30%
e. Video Contest – 5%
f. Beauty Talk – 20%

Mobile – 25% ($250,000) – The predicted result seems to be high as nowadays more and more customers are using their mobile devices for shopping. Developing an app on mobile device may cost close to $100,000 – $200,000 and its annual maintenance may cost close to $20,000. Sephora does not have an app for android phones. With the prediction of increasing android market in USA, the allocation is justified.

Twitter – 10% ($100,000) – Twitter has emerged as a good platform for customer interaction, ongoing trends in the market and two way communication. Sephora has 100,000 followers on twitter. The allocation can be justified in terms of increasing various promotions with the help of twitter.

Facebook – 10% ($100,000) – As per Sept 2010 stats, Sephora has 900,000 fans on facebook. Facebook has helped Sephora in terms of promotions, platform for Beauty Talk. With the allocation of $100,000, Sephora can increase its promotional tactics and also incorporate beauty talk in a more friendly way.

YouTube – 30% ($300,000) – Creating a video on YouTube costs appx. $20,000. Sephora has its own channel on YouTube with around 100 videos and 3mn views. With $300000, Sephora can create 15 different videos providing more and more in-depth details and tutorials about its products and services.

Video contests – 5% ($50,000) – An allocation of $ 50,000 seems to be enough for video contests. The concept of video contests is to involve more and more women by encouraging them to post videos of themselves using Sephora’s products. Sephora can use the funds for various events and sweepstakes.

Beauty Talk – 20% ($200,000) – Beauty talk is a platform which has connected the company with its beauty insiders, future customers and its clients. It was formed as a separate platform to Facebook where customers could ask embarrassing questions without even revealing their names. With beauty talk, Sephora could recognize its ‘Superusers’ – people who answered a lot of questions on behalf of Sephora and then these superusers would be rewarded by Sephora. The only issue that arose was that people have to use two sites simultaneously while using beauty talk. With the allocation of $200000, Sephora can integrate Facebook and beauty talk to form a common and easy to use platform.

2. What do you make of Sephora’s digital and social media efforts as of the fall of 2010? Was it wise in your opinion to create Beauty Talk as a separate social platform to Facebook?

Julie Bornstein, Senior Vice President wants to double the budget for video, social media and mobile applications for Sephora in 2011. In addition, she also needs to evaluate which media platform will have more impact with additional $1 million and justify the spending.

2010 marketing mix was
– Print catalogs
– Direct mail/ Ads
– Emails
– Store window merchandizing
– Online search advertising
– Sales/promotions
– Online display advertising

Beauty talk was launched in September 2010. As more and more people started shopping online, beauty talk became important. I feel that it was wise to create Beauty Talk as a separate social platform to facebook because it connected the company with its beauty insiders, future customers and its clients. It became a central place where clients could anonymously ask personal questions and get quick response from Sephora experts or other members of the Sephora community.

Also with beauty talk, Sephora could recognize its ‘Superusers’ – people who answered a lot of questions voluntarily. It was built with strong search functionality. It also helped Sephora to save and query responses. People could ask potentially embarrassing questions which would not be possible to be asked on facebook as the real identity of the member would be revealed. Viewers could also search previously posted questions and answers. But it did not get the required response as people found it to be more in-depth and less well-understood experience.

3. As Sephora increasingly dabbles with digital marketing and social media, which competitors should the company be most worried about?

Sephora’s competitors include:
a. Departmental stores: Macy’s and Nordstrom
b. Single brand beauty store: MAC
c. Large online merchants: Amazon.com, beauty.com
d. Multi brand specialty store: Ulta Beauty Store

Departmental stores carry majority of the brands that Sephora offers to its customers. Retail stores and manufactures have their personal fan loyalty base. Online merchants compete with Sephora on a large scale as they offer discounts and specialty items and multi-brands. MAC products are not sold by Sephora.

The company should be most worried about ULTA beauty store which is a national chain of beauty stores that brings together designer fragrances, drugstore staples, salon-only hair products as well as a growing selection of prestige cosmetics like Benefit and smash box. There are 331 stores across USA. Ulta has 21,000 in-store products combined with cut and color salons. Unlike Sephora which is located in malls, Ulta is located in strip malls which is convenient for many people as it saves time and also provides easy shopping experience to the customers particularly women.

Ulta stores have critical mass of prestige appeal. Ulta offers inexpensive beauty staples found in retails like target along with easy access to prestige treats. Ulta also has an edge with women older than 44 years as these women tend to be more loyal and also ulta rewards them back in terms of savings. Ulta has its own personality of being approachable and in style. One customer termed Ulta as Sephora’s nemesis.

4. What metrics do you propose Sephora Direct use to measure the success of its digital efforts going forward? Why?

a. One important metric is to review quarterly sale analysis report which will evaluate the performance in relation to the different social media for the target audience. b. Another major metric is to compare sales realized during promotion period and non-promotion period to evaluate whether various promotions are bearing fruit. c. Also, Sephora should see how much traffic is built up on their website – sephora.com d. Sephora should use different social media metric measurements like:

– Applause rate
– Number of likes per post
– Conversation rate
– Number of audience comments
– Amplification rate
– Number of shares per post

e. Another metric is Sephora Beauty Insider registrations which can be useful to know the exact number of women who are the VIPs of Sephora. f. Sephora should also try to analyze the time consumption pattern of the customers in terms of searching on the app.

With these metrics, Sephora can know various demographics of users like what form of social media do they prefer, usage pattern of products by the consumers which can help Sephora in long term to increase sales with existing clients, build relations, attract new clients and increase brand value.

5. What should be the strategic goal of Sephora’s digital and social marketing programs? How can Bornstein satisfy the CEO’s desire to “win” in the digital space?

Various focus points for 2011 budget should be
1. Facebook
2. Beauty Board
3. YouTube
4. Beauty talk

Strategic goals should be:

a. Introduce the concept of an online chat program
b. Become a one stop destination for all beauty related products
c. Improve the digital experience of all Sephora customers
d. Measure the customer satisfaction online by using Voice Of Customer (VOC) survey
e. Create virtual environment platforms for customers
f. Get beauty experts on board to provide in depth advice about any beauty related concerns
g. Create emotional connections to engage more and more customers
h. Try to improve conversion rates by having user friendly websites
i. Try and maintain connections with already loyal customers
j. Integrate the offline and online shopping experience by managing multi channels
k. Be unique and more innovative in comparison to competitors.

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